This is a competing renewal of an R01 focused on understanding the neural basis of cognitive dysfunction in schizophrenia. In the previous funding period we tested the hypothesis that schizophrenia patients had a deficit in the representation and maintenance of context, which could account for a range of cognitive disturbances in schizophrenia, and was associated with a disturbance in the function of the prefrontal cortex. Our results have been strongly supportive of these hypotheses, and in addition suggest that the prefrontal deficits in schizophrenia may be functionally and anatomically specific. Specifically, it appears that while context processing functions of the dorsolateral prefrontal cortex (DDLPFC) are impaired other functions within working memory, such as phonological rehearsal processes associated with the function of posterior ventrolateral prefrontal cortex (VLPFC) are intact. The goal of the renewal is to extend our understanding of the functional anatomy of impaired cognition in schizophrenia by pursing 2 aims. The first Aim is to use event-related fMRI and 3 cognitive tasks to test the hypothesis that impaired cognitive control in schizophrenia primarily involves functional disturbances of the DLPFC and anterior cingulate cortex, 2 highly interconnected regions of the frontal lobe which appear to contribute complementary functions to the regulation of cognitive control, while more superior and inferior frontal regions are functionally intact. The second Aim is to use multiple methods from cognitive neuroscience, including computational modeling, event-related fMRI and high density ERP, to better characterize the functional contribution of one (1) of the above regions, the ACC, to impaired cognitive control in schizophrenia. The studies will be completed in never medicated first episode schizophrenia patients, to address potential confounds of medications and chronicity. Successful completion of this work will increase our understanding of the functional anatomy and mechanisms of cognitive dysfunction in schizophrenia that should help guide the development of treatments for this disabling and relatively treatment refractory aspect of the illness.